October 3, 2010

Heresies so dire (and a few links)…

This is well worth a listen. Heiner Flassbeck launches 2010 UNCTAD Trade and Development Report, with Robert Wade as a discussant, and comes out guns blazing for an approach to development and macro-economic management that’s been too heretical to even mention in polite company for almost three decades. Not so much capital controls (which have been convincingly advocated since at least the Asian Financial Crisis) but a system of managed exchange rates, coupled with wage setting as a tool for controlling inflation. That is, the government setting wage increases across the economy based on productivity gains.

FWIW, I can see the appeal, I’m just not sure it would be possible, except maybe in a few European countries where state/union relations might allow. Also, I’m not wholly convinced that what UNCTAD suggests is a better way of managing and economy than say the Scandinavian approach of relatively free markets coupled with a strong safety net. Still, given the patent failure (again and again and again) of free market economics in my lifetime, the UNCTAD approach at least deserves discussion. And what will be interesting to see over the next few years is whether their position remains an outlier, or whether it returns to mainstream debate.

Paul Krugman argues out that economics is not a morality play. I think he’s wrong – economics is a morality play, it’s just that a particular code of ethics, Utilitarianism, is the game being played. And the funny thing about Utilitarianism, being a philosophy of ends not means, is that sometimes things that seem unfair, or immoral, can be justified, if they lead to improvements in overall welfare. Of course, for the most-part, the unfair and unjust aren’t justified under Utilitarianism, because – surprise, surprise – they cause increased suffering. Krugman’s comment relates to arguments about economic impacts of World War Two and, just to state the obvious here, no Utilitarian would ever argue that World War Two was a good thing because it ended the Great Depression. This being for the simple reason that, while the end of the Depression ended certain sorts of suffering, the War created so much more.

And finally, on the subject of morality places, Tapu Misa has a great column on the demise of David Garrett.